The court was divided over how sweeping the ruling actually is. The biggest impact is that a single donor can now give the maximum amount by law to as many federal candidates, parties and committees as he or she wishes.
The 5-4 split was along party lines, with the five justices appointed by Republican presidents joining the majority and the four appointed by Democratic presidents dissenting.
Chief Justice John Roberts, writing on behalf of the court, said the justices did not reach the question of whether to overturn a key 1976 ruling, called Buckley v. Valeo, which upheld limits on campaign finance donations while also describing how courts should analyze such regulations. Justice Clarence Thomas, who voted with Roberts, said the court had gone further than the chief justice claimed.
Roberts said in his opinion that the aggregate limits violated the First Amendment of the U.S. Constitution, which protects free speech. He rejected the contention of President Barack Obama's administration that the limits are needed to fight corruption.
The caps "do little, if anything, to address that concern, while seriously restricting participation in the democratic process,'' wrote Roberts, appointed by former President George W. Bush, a Republican.
The decision comes four years after the court's landmark Citizens United v. Federal Election Commission ruling that cleared the way for increased independent corporate and union spending during federal elections.
In a dissenting opinion, Justice Stephen Breyer said the ruling, along with Citizens United, "eviscerates our nation's campaign finance laws.''
Wednesday's ruling could threaten the legal architecture that underpins other campaign finance regulations.
The aggregate limits have been in place, in various forms, since 1974, with the most recent version dating back to the 2002 Bipartisan Campaign Reform Act.
Republican donor Shaun McCutcheon, an Alabama businessman, and the Republican National Committee (RNC) had challenged the contribution caps. Before Wednesday's Supreme Court decision, donors could not exceed the $123,200 overall limit during the two-year period.
The case is McCutcheon v. Federal Election Commision, U.S. Supreme Court, 12-536.